New Economics Papers
on Industrial Organization
Issue of 2008‒05‒10
three papers chosen by

  1. Mixed Bundling and Mergers By Laurent Granier; Marion Podesta
  2. Uncertainty in Spatial Duopoly with Possibly Asymmetric Distributions: a State Space Approach By Kieron J. Meagher; Klaus G. Zauner
  3. Oligopolistic Non-Linear Pricing and Size Economies By Carlo Reggiani

  1. By: Laurent Granier; Marion Podesta
    Abstract: Does bundling trigger mergers? We observe mergers between firms belonging to independent industries. These mergers enable firms to bundle. Indeed, many telephone firms, internet access providers or cable TV operators merge. Thus, the merged firms can provide bundles. Therefore, the question is the following: can bundling strategies allowed by a two-market merger create an incentive to merge? We consider two horizontally differentiated markets. The correlation of reservation prices is the sole link between these two markets. In this framework, we show that bundling strategies create incentives to form multi-markets firms. Merger decisions are endogenous in our model.
    Keywords: Product Bundling, Endogenous Mergers, Multi-Market Contacts
    Date: 2008
  2. By: Kieron J. Meagher; Klaus G. Zauner
    Abstract: In spatial competition firms are likely to be uncertain about consumer locations when launching products either because of shifting demograph- ics or of asymmetric information about preferences. Realistically distri- butions of consumer locations should be allowed to vary over states and need not be uniform. However, the existing literature models location uncertainty as an additive shock to a uniform consumer distribution. The additive shock restricts uncertainty to the mean of the consumers loca- tions. We generalize this approach to a state space model in which a vector of parameters gives rise to different distributions of consumer tastes in dif- ferent states, allowing other moments (besides the mean) of the consumer distribution to be uncertain. We illustrate our model with an asymmetric consumer distribution and obtain a unique subgame perfect equilibrium with an explicit, closed-form solution. An equilibrium existence result is then given for the general case. For symmetric distributions, the unique subgame perfect equilibrium in the general case can be described by a simple closed-form solution.
    Keywords: Location, Product Differentiation, Uncertainty, Hotelling
    JEL: C72 D43 D81 L10 L13 R30 R39
    Date: 2008–04
  3. By: Carlo Reggiani
    Abstract: The effects of non-linear pricing are determined by the relationship between the demand and the technological structure of the market. This paper focuses on a model in which firms supply a homogeneous product in two different sizes. Information about consumers' reservation prices is incomplete and the production technology is characterized by size economies. Four equilibrium regions are identified depending on the relative intensity of size economies with respect to consumers' evaluation of a second unit of the good. The desirability of non-linear pricing varies across different equilibrium regions.
    Keywords: non-linear pricing, size economies, supply technology.
    JEL: D43 L11 L13
    Date: 2008–05

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